India’s policy on urea

Source: The post “India’s Policy on Urea Production” has been created based on “India’s policy on urea” published in “The Hindu” on 28th July 2026.

UPSC Syllabus: GS 3 – Agriculture

Context: The Union Cabinet has approved the National Investment Policy for Urea (NIPU), 2026) to promote self-reliance in urea production amid concerns over fertilizer shortages, import dependence, and rising demand.

Evolution of India’s Urea Production Policy

1. The Government introduced the National Investment Policy (NIP) for the urea sector in 2012, followed by modifications in 2013 and October 2014 to encourage fresh investments.
2. Under the 2012 policy, six new urea plants were established, including four through Joint Venture Companies (JVCs) of nominated Public Sector Undertakings (PSUs) and two by private companies.
3. India currently has 33 operational urea manufacturing units with a total reassessed/installed capacity of 269.42 Lakh Metric Tonnes (LMT).
4. The Government amended the policy again in May 2015 for 25 existing gas-based urea units to increase domestic production.
5. The 2015 amendment resulted in an additional annual production of 20–25 LMT of urea.
6. India’s urea production increased from 225 LMT in 2014–15 to 314.07 LMT in 2023–24.
7. During 2025–26, the country produced 293.30 LMT of urea.
8. Despite higher domestic production, India continues to import urea to bridge the gap between domestic demand and production.

Key Features of the National Investment Policy for Urea (NIPU), 2026

1. The policy aims to promote self-reliance in urea production by encouraging investments in new gas-based urea manufacturing units.
2. The policy separates fixed and variable costs to improve transparency in determining production costs.
3. The policy introduces a Return on Equity (RoE) band with a minimum of 12% and a maximum of 16% to ensure financial viability for investors.
4. The policy reduces foreign exchange risk by converting the fixed cost component into Indian Rupees after four years based on prevailing exchange rates.

India’s Fertilizer Subsidy

1. The total fertilizer subsidy increased from ₹1,77,162.06 crore in 2024–25 to ₹2,17,281.10 crore in 2025–26.
2. The urea subsidy increased from ₹1,24,319.50 crore in 2024–25 to ₹1,42,175.74 crore in 2025–26.
3. The subsidy for phosphorus and potassium fertilizers stood at ₹74,999.99 crore in 2025–26, compared to ₹52,810 crore in 2024–25.
4. The Government also provided ₹105.37 crore in 2025–26 and ₹32.56 crore in 2024–25 for promoting organic fertilizers.

Availability of Urea

1. The country’s kharif 2026 urea requirement is estimated at 370.84 LMT, while the available quantity is 432.44 LMT.
2. Out of the available quantity, 381.59 LMT will be sold through the Direct Benefit Transfer (DBT) system.
3. Under the DBT system, subsidized fertilizers are sold through Point of Sale (PoS) devices, and beneficiaries are identified using Aadhaar Card, Kisan Credit Card (KCC), Voter Identity Card, or other approved identity documents.
4. During 2024–25, the country’s urea requirement was 364.01 LMT, while availability stood at 443.83 LMT.

Challenges in India’s Urea Sector

1. India continues to depend on urea imports because domestic production remains insufficient to meet the growing demand.
2. The fertilizer subsidy burden is increasing, with the total fertilizer subsidy rising to ₹2,17,281.10 crore in 2025–26, placing significant pressure on the government’s finances.
3. Overuse of urea and other chemical fertilizers has led to concerns about nutrient imbalance, declining soil health, and environmental sustainability.
4. Global geopolitical developments, such as the West Asia situation, can disrupt fertilizer supply chains and create concerns about fertilizer availability during the agricultural season.
5. Climate variability, including El Niño-induced higher demand, increases pressure on fertilizer availability and distribution.
6. Dependence on gas-based urea production exposes the sector to fluctuations in natural gas prices and foreign exchange risks, although NIPU 2026 seeks to mitigate part of this risk.
7. The adoption of Nano Urea remains limited because of concerns regarding its scientific efficacy and field performance.
8. Ensuring balanced fertilizer use remains a challenge, despite government efforts to promote Integrated Nutrient Management (INM) and organic fertilizers.
9. Efficient implementation of due investment and timely establishment of new gas-based urea plants will be essential for achieving the objective of self-reliance in urea production.

Measures to Promote Balanced Fertilizer Use

1. The Government promotes Integrated Nutrient Management (INM) to ensure balanced and efficient use of fertilizers.
2. INM encourages the scientific integration of organic sources, chemical fertilizers, and biological inputs for sustainable nutrient management.
3. The objective of INM is to meet crop nutrient requirements economically while maintaining long-term soil fertility.
4. The Government has also promoted Nano Urea, although its adoption remains limited because of concerns regarding its scientific efficacy and field performance.

Conclusion: The National Investment Policy for Urea, 2026 seeks to enhance domestic urea production, reduce import dependence, improve transparency in the sector, and strengthen India’s fertilizer security while promoting sustainable nutrient management practices.

Question: Discuss the evolution of India’s urea production policy. What are the key features of the National Investment Policy for Urea (NIPU), 2026?

Source: The Hindu